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Mo Money, Mo Problems

While the Lakers have traditionally been one of the big spending teams in the league, the new CBA comes with new terms that will almost certainly curb the Lakers spending in more ways than one. As of now, the Lakers have a whopping $99,981,237 in total salary (Thanks to Eric Pincus at Hoopsworld for his excellent work), and with the luxury tax coming in at $70.307 million, that means that the Lakers will have a total salary commitments of approximately $130M this upcoming season, which will easily be the most luxury tax the Lakers have ever paid (Don’t worry, the Knicks have the highest luxury tax payment ever with $45M in 06-07). While that’s no small amount to scoff at, us Lakers fans have gotten used to Dr. Buss whipping out his checkbook and paying top dollar for the best chance to win a championship. Bringing in Steve Nash and Dwight Howard over the summer certainly gives the Lakers that best chance, and the attention alone will make it money well spent.

Next season, however, is when things start to get hairy. That’s when the new tiered luxury tax system begins, where teams pay extra amounts for every $5M they go above the cap (for a detailed breakdown, see Larry Coon’s CBA FAQ). Currently, the Lakers will have somewhere between $68M-$80M, depending on which options are picked up, assuming they don’t sign any new players that are not under contract for that season. In order to analyze further, we can make some base assumptions:

1.) MWP will NOT exercise his Early-Termination Option (which he would be pretty dumb to do, but he’s done crazier things).

2.) Chris Duhon will be kept this season and waived next season (his deal is only partially guaranteed next year).

3.) The Lakers pick up Jodie Meeks’ Team Option.

4.) The Lakers fill out the roster with minimum guys (or bring back some of Jamison, Clark, Ebanks, Morris, or Goudelock).

One thing we don’t have to assume is the amount of money Dwight Howard will get. Since Howard’s contract is already over the maximum salary, the maximum salary for his new contract will be 105% of his old contract ($19.5M), so his new contract will be just about $20M. This is the absolute maximum Howard can get from ANY team next season. However, the Lakers owning Howard’s Bird Rights give them two advantages over other teams:

1.) They can sign Howard for a maximum of 5 years, as opposed to a maximum of 4 years for other teams

2.) They can offer raises of 7.5% each year, while other teams can only offer raises of 4.5%.

These two differences mean that Howard will be choosing between $85M for 4 years from any other team, and $116M for 5 years from the Lakers (He’s gonna have to really hate LA to leave $31M on the table).

Now, if we assume all the things I’ve listed, and given that Howard will sign a max contract, LA’s total salary will stand at approximately $97M in salary obligations next season. Filling out the roster with minimum guys, this will put the Lakers right around $100M.

This doesn’t seem so bad at first glance, considering it’s only a little more than this season’s roster obligations. The new CBA, however, takes this somewhat tame monster and turns it into a beast:

1.) For the first $5M over the tax level, teams will pay $1.50 for every dollar, giving a total of $7.5M.

2.) For the next $5M, teams will pay $1.75 for every dollar, a total of $8.75M

3.) Next $5M, $2.50 per dollar, $12.5M

4.) Next $5M, $3.25 per dollar, $16.25M

5.) For every $5M after that, add another $0.50 to the per dollar amount, so $3.75 per dollar for $20-$25M over the tax level, $4.25 per dollar for $25-$30M over the tax level.

If the Lakers have salary commitments of $100M, and assuming the luxury tax stays almost level at $70M, they will be $30M over the tax level. Adding those numbers up, the team would pay a whopping $85M in luxury tax payments, for total salary commitments of $185M. Note that this is almost twice the highest luxury tax payment ever.

This level of luxury tax hell will almost certainly last only one season. Assuming Howard re-signs, the only players under contract the following season would be Howard and Steve Nash, leaving the Lakers plenty of room to sign new, smaller contracts once Kobe and Pau’s huge contracts are up. Relief would come just at the right moment as well, since 2014-15 will be the first year of the repeater tax, in which each of the per dollar amounts given above would be increased by $1. This basically means that LA would be paying the new tax and the old tax, so if they were to say, have $100M in payroll with a $70M luxury tax level, they would pay a total of $215M in total salary commitments, more than double their original payroll.

Some could make the case that the Lakers don’t need to go into cost-saving mode, simply because they have a local tv deal that will net them 5 freaking billion dollars over the next 25 years. The reasons for not wanting to stay over the luxury tax, however, may be related to roster flexibility as opposed to fiscal responsibility. The new CBA places a number of restrictions on team that are over the “apron,” or $4M above the luxury tax level (found here), which include things like losing the Bi-Annual Exception, having a smaller Mid-Level Exception, being able to only take back %125 of outgoing salary in trades (as opposed to 150% for nontaxpaying teams), and loss of the Gilbert Arenas Provision (recently used to sign Jeremy Lin and Omer Asik).

Perhaps the greatest loss, however, will be the inability to perform sign-and-trades, a rule which comes into effect in 2013-2014. This means that trades like the recent Steve Nash trade will be impossible for teams over the apron like LA. If they wish to re-load around Dwight Howard, they’ll either have to maintain their current amount of salary and trade for stars using their existing assets (a very, very expensive option), or they’ll have to get as far below the cap as possible to make a max offer (while almost certainly gutting the team around Howard). So while the Lakers may have all the money in the world to pay all the luxury tax they could ever spend, it may be that the type of talent that the Lakers wish to acquire simply won’t be available to them.

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One thing we are not talking about is what the Lakers can do in future years – assuming they get under the luxury tax cap in 2014-15. Should this happen, it will be much harder to increase salaries into the range we have today, even if only for a year or two. With the effective ‘hard cap’ rule in effect for teams that start to ‘crawl’ over the luxury cap, in addition to the repeater rule for teams that are only under the cap for one year, it is going to be much harder to make any large jumps into the luxury tax terrain.

I think what happens next season re: salaries will largely depend on results this year. If the new mix gels and brings home a championship, the assumptions above will be close. I would guess that there would be negotiations with MWP to exercise the ETO to sign for less next year with years added to reduce the lux tax.

If the team comes up short, I could see a draft day deal with Pau going out to a team under the cap for some salary relief (remember expiring contracts are relevant with respect to Pau only if traded before this year’s deadline as he himself is an expiring contract next year).

We Laker fans are pretty dang lucky that we have an owner that is willing to open up his wallet like this. With this Howard trade, the next 5 years don’t seem as bleak as they could have. Howard’s name will help bring in those free agents 2 years from now when Kobe, Pau and Metta are off the books.

That’s why it wouldn’t surprise me if Pau is shopped again before next season, especially if the team underwhelms this year. This post shows why even shaving off a few million can make a huge difference. I don’t think it’ll happen since it’s clear they’re going all-in for a title (unless a good, cheaper PF is obtained in return), but it wouldn’t completely shock me.

Snoopy-
If Howard comes back and shows that he is fully recovered from the back injury, then I think that you may be right. I’m actually interested in seeing how effective Pau will be playing at the 5 with Nash running the show. His numbers and stock could skyrocket early in the season if Howard is unable to be ready.

If Howard has lingering effects from the surgery, then Pau probably isn’t going to be shopped at all.

Bringing in Nash coupled with Kobe’s contract this is at least a 2 yr run with this core. A spike in production from Ebanks can make Ron’s $15 mil hit a realistic amnesty option. Or saving yourself $40 mil, by amnestying Pau, could be appealing. But trading or releasing Pau doesn’t make sense with the direction Jim has decided to take this team and the simple fact his skillset is irreplaceable. We’re in win now mode and after 2014 season Kobe and Pau clear off $49 mil off the books. I think it’s safe to say Nash, Kobe, Meeks, Pau, Hill, Dwight (if he resigns) are safe for next year. Beyond that is anyone’s guess.

Agreed that this is a two year run, no matter what. The Lakers did not put this all together, only to nuke it after one year, to save taxes. After the 2 years, is when it gets interesting. The key will be our success. If we win a title, then there is a decent chance that everyone tries to keep the band together (KB and Pau willing to sign for less and Jim willing to continue to pay punitive taxes). If we do not win, then we probably start to shuffle the deck, for new cards surrounding Dwight. I myself am hoping for the 20 year Laker career for Kobes. However, having D12 as the post KB superstar, as a back up plan, is not bad either. Did I let you guys know that I thought getting D12 was a good move? : )

Good post, and I am glad you brought up the new S and T rule. I just learned about that about a month ago ( I thought it kicked in in 14/15) so anyone thinking about Paul probably needs to table that (I mean “anyone” in general–not directed at people here).

As to the rest, as others said, it simply depends on what happens this year.

One point about Howard: his Adidas deal will likely be large enough that he could leave 31M on the table–but the deal is also enhanced by being in LA and on the Lakers.

The highest paid player on the Lakers is Dr. Buss. Ticket sales alone pay for players’ salaries. Who cares about the luxury tax? They’re not going bankrupt. Dr. Buss isn’t the only owner of the Lakers. AEG owns them too.

Next year will be interesting, but I think everyone understands that it is difficult to perform right after a big trade like this. Still, how Howard recovers and Pau meshes with Nash will be key to our next step.

As for Buss, well, we’re lucky to have somebody who is not only willing to spend but knows HOW and WHEN.

After mentioning on Twitter that he would like to work out with Kareem Abdul-Jabbar, new Los Angeles Laker Dwight Howard took the first step towards that plan by sitting down with the Hall of Fame center Monday afternoon.

“Just sat down with @kaj33,” Howard tweeted after the meeting. “Man God is so good. Was in tears. What a blessing. This is like a dream come true. Go Lakers.”

Howard then tweeted a picture of the two of them together with the caption, “Me and @kaj33 together. For many years to come.”

That image is intriguing – while the jerseys honor the giants of LA, they are not all equal. Wilt’s is higher than KAJ’s, while Shaq’s is below Mikan’s. Is there a subliminal message in there that D12 wants to convey? Or am I just hallucinating?

(1) Stick with 1 superstar
Nash and Howard takes about 30 million in salaries. If Pau and Kobe and MVP (or equivalent talent/experience players) resigns at RM8 million per person, then total starting five salary will be 54 million, leaving about 5-8 million to spend on bench. This is totally plausible with rookies and veteran minimum. But it will be hard to contend.

(2) Get another superstar
Nash and Howard takes about 30 million in salaries. Sign another max player for 20 million. Total 50 million. Spend another 10 million on two more players for starting 5 (at 5 million, we are looking at pretty average role players). That would almost hit the hard cap already, leaving very little for bench signings.

I love the track only because it was part of my early education in hip-hop. Sadly, it’s Biggies only by technicality. Puffy capitalized on some unreleased materials and catapulted himself into the stratosphere. Biggie’s verse doesn’t even seem to fit the rest of the song. I’m just tripping.

Great article. I think that if the team is very successful over the next two years (think 2 chips), it’s likely that they’ll try to keep the team together. I see JH’s scenario very likely in that situation, with Pau and Kobe resigning for 5-10 mil and MWP for a vet min. If they resigned for even less, then we could pull for another semi-max (maybe a second PG to groom for post-Nash).

Excellent post. Very informative to individuals such as myself who don’t have the time to do the necessary research in order to figure out how we’ll be able to maintain a Championship Caliber Roster under the new CBA.

“Just sat down with @kaj33 .. Man God is so good. Was in tears. What a blessing. This is like a dream come true. Go Lakers .. Me and @kaj33 together. For many years to come.” …. Good to hear those words coming from DH-12, but as we all know, action speaks louder then words. So until his ‘John Hancock’ is on a new deal, I, along with several other members of the FB&G Community will be on edge.

(Is it blasphemous to cite a Biggie song in an LA blog?) … Not @ all. And this is coming from an individual who was born, raised and still resides in NYC. Do remember, that even Biggie had a song titled ‘Going Back To Cali’ .. Following LL’s lead.

My assumption (not based on any insider information) was that the Lakers would pay the taxes this year and next and reset in 2014/15.

The hidden bonus is that is when Kobe and Pau’s current deals expire. If they are still productive and want to they could sign really team friendly extensions (like Tim Duncan just did). This would allow the Lakers to sign a quality FA and still be below the tax line.

Obviously, resigning Kobe and Pau would need to be mutual. But if the Lakers win a championship or two these next two years why wouldn’t these two want to continue the magic.

I guess what I am trying to say is that yes, I believe the team will reset via the tax bar in 2014/14. However, that does not mean the team’s performance will hit bottom as well.

Given that the CBA makes constructing new superteams all but impossible, I actually think the Lakers are in a (comparatively) good position.

They will have two starts in DH12 and Nash with a likelihood of Kobe and possibly even Pau resigning at a discount (the new CBA makes it much tougher for declining stars to see big free agent $). Assuming Kobe signs for 8-10M, that leaves the Lakers with 3 real stars, plus a decent amount of cap space. If Pau does the same, it’s even better. What other team in the league could have that kind of roster with ANY remaining flexibility? Hey, I can be the most pessimistic Laker fan on the planet – mostly to protect myself against soul-crushing heartache – but I see the only real risk to a Lakers juggernaut being age/injury (and maybe also some concerns about Mike Brown), not chemistry and also not the new CBA.

And if things go poorly over the next two years, they can always pull the plug and rebuild around Howard. Given the constraints of the new CBA, Mitch has given himself a lot of options as the Lakers move forward.

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Whoops– I just read Morgan’s post and realize I am just a reflection on Plato’s cave: great minds, and all that…

I don’t see Kobe signing for 8M, unless…
1. We win 2 chips.
2. We lose in Finals this year but win the next.
3. Kobe gets hurt bad and is limited to a spot-up shooter/post-up guard.
4. He gets a Magic-type deal with Lakers shares.

And I fully expect to see Pau gone by the end of his contract or even before, no matter what happens with this team. Don’t get me wrong, he is by far my favorite Laker since he arrived, but I don’t believe Mitch will match any offers other teams make. Bobcats, Pistons, Raptors… possibly Houston again. Will be sad to see him go.

For people talking about chemistry and whatnot, remember defense wins championships. We got a defense-minded coach, the best defensive player in the game and 3 of the most talented offensive players ever, plus a nice bench. My main worries this season are Durant, Mike Brown, Kobe’s knees and Ray Allen. Slashers like Westbrook and Rose that torched us time and again should present less of a burden with Howard on the floor to bother shots inside.

The current CBA is a JOKE!!! Sure they raise up the luxury tax, but when u have people like Jerry Buss that simply don’t give a damn, it’s not going to work. In fact from what I see, it will widen the gap between the haves and the have nots in the NBA. That’s why I believe a hard cap ios the best solution–not at 50$ million of course, but maybe 75 or 80$ million with teams only allowed to have ONE MAX Contract player. That is the only to assure parity and future prosperity in the NBA.

That image is intriguing – while the jerseys honor the giants of LA, they are not all equal. Wilt’s is higher than KAJ’s, while Shaq’s is below Mikan’s. Is there a subliminal message in there that D12 wants to convey? Or am I just hallucinating?

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I included it because as noted Howard chose it for his background. Early on in the process, he was rejecting the idea of following in the footsteps of the great Laker centers.

The contrast between Dwight and Bynum’s appreciation and respect for Kareem is music to my ears. I fully expect a similar contrast when it comes to appreciation and respect for one’s teammates… and one of the reasons why I expect team chemistry to develop quickly.

Call me crazy, but I see Kobe retiring in two seasons. Kobe is not trying to hang around to be a glorified role player. And a 36 year old Kobe would be just that. Let’s not fool ourselves.

Gasol’s situation is different. He plays closer to the rim and doesn’t have to chase defenders around like Kobe does. It helps that Pau has a highly refined skill set. As long as he can keep position Pau can get a shot off in the post against just about anyone. He will remain effective a little longer than Kobe.

Assuming Howard remains healthy, and assuming he remains one the five best players in the league for several more years, the Lakers are in a good position. I have no doubt Mitch and Jim will be able to rebuild the team around Howard within the limits of the new CBA.

To be fair, I think that Bynum was very appreciative of Cap early in their relationship. But after years of coaching, that’s seemed to have changed. We’ll see how dedicated Howard is to my namesake once they work together on a regular basis.

Bottom line – the pressure is on to win. We have the pieces in place and they need to produce and that is how it should be and always has been with the Lakers. If we are successful, it greatly improves the odds of D12 re-signing. It improves the odds of Kobe playing 20 years. It improves the odds of people wanting to sign team friendly extensions in a couple of years. It also improves the odds of us picking up key late season type signings (vagabonds if you will) who are chasing rings. In other words winning begets more winning. We have the best team and now we must produce.

I’m with T. Rogers – unless we win the chip in 2014, I think Kobe will hang them up after his current contract ends. It’s not because he won’t be good, or because of the money, but because his body won’t allow him to train/tune as much as he’d like to.

Kobe has a good chance of retiring even if he wins a championship or two (hah), but with Nash sticking around in relatively-elite state until 38, I don’t see why Kobe won’t accept that challenge. Also, I forget how old Jordan was when he was with the Wizards, but I think Kobe has a few years til he catches up with that too.

Anyone interested in betting how much Kobe is going to let himself go after he retires? Will he approach Barkley/Magic levels, or be more like Jordan/Bird (who looks leaner than Barkley/Magic)… or will he be closer to Kareem, not gaining much weight at all?

I’d say he will be more like Jordan/Bird. They both have picked up some weight. But it is clear they still take good care of themselves. I can’t see Kobe letting himself completely go the way Barkley did. But then again if he retires to some quaint Italian seaside community and eats pasta all day he may develop some love handles.

Kobe is going for a 20 year career. This roster is going to prolong his career. If all goes according to plan, Kobe will have played a lead role in three different championship teams, hopefully all of which won multiple championships. Do not talk about this man’s retirement, when we are just entering another chapter. Further, he has 4 more to catch on the all time list. I was near courtside when he moved into 8th and again we he moved into 5th. I hope I am there when he catches Wilt. Do not talk of this man’s retirement. Rather just marvel at his achievement.

I for one wishes he would play forever, but I think he sees the writing on the wall. As I said in my original mail, if he wins a chip in 14, he will come back. If not – IMHO, he isn’t crazy about the scoring title – see what he did last year. Keep in mind that this is not what you or I want, but what he wants.

rr: I called Cuban a genius. However he lost this gamble. I still think it was a good gamble, because I do not think Dallas was winning a ring last year in any case. Your other post is on target. D12 will re-sign with us.
any_one_mouse/KenOak/Cdog: Let’s hope KB goes for it. 7 titles and #1 on the all time scoring list. It is a good dream. Be with me on this. My last dream came true : )

“Probably” is still a pretty strong word to use considering the financial hoops the Mavs would have to jump through to sign two max level players with Dirk already on their books. Getting one is certainly plausible, but both would be very unlikely.

Dwight seems pretty sensitive about his public image, which maybe is why he inexplicably signed a one year extension with Orlando when he really wanted to go to the Nets–he was getting hammered by the press as pulling another “Decision”.

Well now he’s aligning himself with the Laker legacy of HOF centers. It’ll be hard for him to leave after one season without looking like a coward now. That, plus the fact that the franchise can reboot around him after next season, plus the money difference, means he’ll likely stay.

I echo the kudos about Lakers management going “all in” now while still staying flexible in the future. In contrast, the Heat have $76m committed to 7 players in 14-15 when the repeater tax kicks in. Their Big 3 alone will cost almost $63m in 15-16.

The Thunder were constructed post-CBA, so their salary structure looks better long term. They’re going to be a threat for at least the next 5 years, maybe longer given how well they draft.

Dallas will have room to manuever, if it looks like manuevering will help them. It will have to start, though, with Howard and Paul wanting to “Escape from LA” and they may not want that. Whether it is even on the table will depend on how things go. And, of course, Howard and Paul could take a little less than max–there is, uhh, precedent for that.

I think Howard will stay. But until he signs, we should not assume that he will.

I also believe that this is one of those rare situations in which the fans might actually make a small difference; Howard is IMO more likely to stay if the fanbase is wild, raucous, warm, and welcoming from day 1.

Not everybody has the cache of a Buss or Riles. Cuban found that out the hard way.

He gets credit for the great patchwork job he’s done to his roster this year. And is always an option mainly because of no state taxes, but letting a trade chip walk for cap space seems like that was the beginning of the end.

Like I said, the odds favor Howard staying and that is how I would bet if I had to bet. But I don’t think it’s a done deal, and I wouldn’t overreact to Howard’s current upbeat behavior. I want to see:

-Howard playing free and easy physically
-Howard playing under Brown
-Howard playing with Kobe
-The Lakers beating OKC in the WCF

Before I start writing epitaphs for Cuban.

Basically, this is the most excited I have been about a season since Phil Jackson was hired the first time. But I am also not looking past this season; a lot rides on it and it is easy enough to see where things could go wrong.

I just Watched game 3 of NY-MIAMI last season playoff game. I thought NY battled hard in that series both defensively and offensively, they can hang with the HEAT especially this coming season with Kidd on the point. That team is going to be better.

No reference to Kobe, so you can read through – and it’s well worth a read 🙂 Basically its about Mark Cuban (of all people!) blasting a basketball stat (Wins Produced), and saying statheads don’t really get what the game is about.

He goes on to make a claim of how Nowitzki positively impacts his team without having gaudy stats himself 🙂

WP has been taken down pretty hard by some other stats guys; as Abbott notes (very briefly) the main complaint about it is that gives too much credit to low-usage high-efficiency players, while giving too little to the oopposite type, like say, Kobe.